When a Bullish Signal Appears in a Late-Stage Rally
Last Friday, the $S&P 500(.SPX)$ experienced a rally of rare magnitude, producing a powerful breadth signal similar to the one observed on April 9th. The advancing volume on the NYSE reached 91.3%, indicating that an overwhelming majority of trading was concentrated in rising stocks.
Statistically, this "90% upside day" is a historically bullish signal, having occurred only fifteen times since 1980. Following these events, the S&P 500 has a win rate of over 80% one month later and 83% six months later.
However, two critical points are worth noting. First, in the 20% of cases where the signal failed, the index fell by an average of -10% one month later. Second, this signal is occurring today in a mature bull market, not during a bounce from a major selloff like the one on April 9th.
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